2020 (2) TMI 1022 - HC - Income Tax

Revision u/s 263 - TDS u/s 194C on export freight payment - HELD THAT - Tribunal considered the materials placed before it and found that the respondent assessee had made payment for export freight to the Indian Ocean Shipping and Logistics Services, which was an Indian Agent acting on behalf of the non-resident shipping company for collecting freight demurrage and other charges and reimburse the same to the shipping company. Relying upon the CBDT circular No.723 dated 19th September 1995, the Tribunal held that where payment is made to the shipping agents of the nonresident, ship owner or charter, the agent steps into the shoe of the Principal i.e. shipping company and according to the provisions under Section 172 of the Act, 1961 which provides for shipping business in respect of the non-residents would be applicable and the provisions of Section 194C or 195 which provides for deduction of tax at source shall not be applicable. The Tribunal, therefore, held in the facts and circumstances of the case that the PCIT failed to consider during the course of assessment proceedings that the assessee had furnished the relevant materials in respect of export freight payment and it is also not controverted by the PCIT, and therefore, on the basis of undisputable finding brought on record by the respondent assessee during the course of assessment proceedings under Section 263 of the Act, 1961, it cannot be said that the assessment order is erroneous or prejudicial to the interest of the Revenue in any manner.

Summary

Issues:
1. Appeal by Revenue under Section 260A of the Income Tax Act, 1961 against ITAT order for assessment year 2013-14.
2. Substantial questions of law proposed by Revenue.
3. Assessment by Assessing Officer and revision by Principal Commissioner of Income Tax (PCIT) under Section 263 of the Act.
4. Disallowance of export freight amount for non-deduction of TDS.
5. Tribunal's decision on the matter and rejection of PCIT's order.

Analysis:

1. The Tax Appeal was filed by the Revenue against the order of the Income Tax Appellate Tribunal (ITAT) for the assessment year 2013-14. The Revenue raised substantial questions of law regarding the correctness of the ITAT's decision on various issues.

2. The respondent assessee declared a total loss for the assessment year. The Assessing Officer finalized the assessment under Section 143(3) of the Act. Subsequently, the PCIT invoked revision powers under Section 263 of the Act due to non-deduction of TDS on export freight paid by the assessee to a shipping company. The PCIT also highlighted the non-filing of Form 3CEB report by the assessee.

3. The PCIT issued a show cause notice and directed the Assessing Officer to pass a fresh assessment order after considering the observations made under Section 263 of the Act. The assessee challenged this order before the Tribunal, which analyzed the situation and concluded that the payment made by the assessee to the Indian agent of a nonresident shipping company did not require TDS deduction as per relevant provisions.

4. The Tribunal found that the PCIT failed to consider the materials provided by the assessee during the assessment proceedings. Relying on a CBDT circular and provisions of the Act, the Tribunal held that the assessment order was not erroneous or prejudicial to the Revenue's interest. Therefore, the Tribunal dismissed the appeal by the Revenue.

5. Based on the facts and findings presented, the High Court determined that none of the questions proposed by the Revenue could be considered substantial questions of law. Consequently, the appeal by the Revenue was dismissed.